Higher R-22 Prices Are Necessary

HVAC is one of the most regulated industries because we rely on refrigerants that are either ozone depleters, are high in global warming potential, or both. Protection of the environment is why higher R-22 prices are necessary and some would argue, inevitable.

Hydrochlorofluorocarbons (HCFCs) are a class of chemical compounds that deplete the stratospheric ozone layer, leading to overexposure to ultraviolet (UV) radiation at the earth’s surface. HCFC-22 (R-22), the most widely used refrigerant, is in this group that the Environmental Protection Agency (EPA) is phasing out in the coming years in order to comply with the Montreal Protocol Treaty. This poses a major challenge to our industry because, although HCFCs have a variety of applications such as foam blowing, solvent cleaning, fire protection, etc., they are mostly used in air conditioning and refrigeration applications. According to the EPA’s latest Vintaging Model, the air conditioning and refrigeration industry currently represents 97 percent (by mass) of R-22 consumption and 88 percent (by mass) of total HCFC consumption.

So why are higher R-22 prices necessary? Because, as new production is continually phased down by regulation (which limits market supply), future service requirements will inevitably increase the price of R-22. This assumes that other factors such as the rate of market transition to alternatives, levels of imports of used R-22, equipment leak and loss rates, and other associated factors are predicted correctly. Although no one likes additional regulation or higher prices, this is the reality for our industry, and it is necessary because within the current regulatory framework, without higher R-22 prices the recovery, reclamation, and recycling of R-22 will not meet projected servicing demands.

In order to facilitate increased recovery, sufficient monetary incentives must be provided to contractors and the distribution channel in order to recover used R-22, pay for transportation and reclaiming costs, dispose of contaminated material, possibly blend in new material, and then price the product to compete with imported and new production.

SHORTAGES ON THE HORIZON

The HVACR industry could experience shortages in 2015 if only newly manufactured refrigerants are available to meet overall demand. Therefore, in order to encourage the transition to alternative refrigerants and to increase the reclamation of HCFCs, EPA’s 2010 HCFC Allocation Rule first sets HCFC production and import limits for the 2010-2014 period, in order to be in compliance with 2010 phasedown caps under the Montreal Protocol.

In addition, the R-22 consumption allocations decrease annually, expecting that recovered material will comprise a greater proportion of the supply required to meet total demand each year - from 20 percent to 29 percent of total demand by 2014. However, the price of R-22 has only increased slightly since 2008, and not nearly enough to sufficiently impact conservation practices. It is estimated that only 5 to 10 percent of the refrigerant removed from service is recovered for reclamation and returned to the market. According to a 2009 EPA report, a 26 percent recovery rate is the lowest rate necessary to meet future R-22 servicing demands - and it may go as high as 50 percent. Currently, our industry is nowhere near this level of recovery and reclamation. Higher prices are needed to change this business-as-usual practice to ensure the recovery of the used material increases substantially.

The HVAC industry must begin now to preserve our installed R-22 base as we transition to refrigerants like R-410A and approach the next mandated 2015 phase down. This should not only include the recovery of R-22 and other refrigerants, but also renewed efforts to prevent leaks and improve containment and management. Finally, our industry must ensure that during the recovery process, R-22 is not cross-contaminated with other refrigerants, which reduces the yield of useable product and adds substantially to the cost of reclamation.

The bottom line is that it is in our best interests financially and environmentally to make the extra effort to assume a cradle-to-grave approach when managing R-22 and all other fluorinated refrigerants. As stewards of the environment, we must establish and maintain all reasonable measures that recover, reclaim, and recycle these substances in a cost-effective and environmentally responsible way, especially as we approach the next scheduled phasedown date in 2015. A higher R-22 price will provide the incentive to get these things done.